Atmos Energy Corporation (NYSE: ATO) today reported consolidated
results for its fiscal 2011 first quarter ended December 31,
2010.
- Fiscal 2011 first quarter consolidated
results, excluding net unrealized margins were $73.7 million, or
$0.81 per diluted share, compared with net income of $66.5 million,
or $0.71 per diluted share in the prior-year quarter.
- After including noncash, unrealized net
gains of $0.3 million, or $0.00 per diluted share, fiscal 2011
first quarter net income was $74.0 million, or $0.81 per diluted
share. Net income was $93.3 million, or $1.00 per diluted share in
the prior-year quarter, after including unrealized net gains of
$26.8 million, or $0.29 per diluted share.
- For the three months ended December 31,
2010, regulated operations contributed $67.4 million, or $0.74 per
diluted share, compared with $59.9 million of net income, or $0.64
per diluted share in the prior-year quarter.
- Nonregulated operations contributed
$6.6 million of net income, or $0.07 per diluted share, compared
with $33.4 million of net income, or $0.36 per diluted share for
the same three months last year.
“We are pleased to deliver solid first quarter financial
results,” said Kim Cocklin, president and chief executive officer
of Atmos Energy Corporation. “Our core regulated operations
provided stable and predictable results from the enhanced rate
designs achieved in recent years. Results from our nonregulated
operations remained constant, despite continued low gas price
volatility.”
“Consolidated net income increased 11 percent over last year,
after excluding the net unrealized gains from both periods. We
remain on track to meet our guidance for fiscal 2011 of earning
between $2.25 and $2.35 per diluted share,” Cocklin concluded.
Results for the Quarter Ended December 31,
2010
Natural gas distribution gross profit increased $5.2 million to
$299.8 million for the quarter ended December 31, 2010, compared
with $294.6 million in the prior-year quarter. This increase is due
largely to a $14.1 million increase in rates, primarily in the
company’s Texas, Louisiana, Missouri, Kentucky and Kansas service
areas. Partially offsetting the increase in rates was a $4.9
million decrease associated with a 10 percent drop in consolidated
distribution throughput, caused principally by warmer weather this
fiscal quarter compared to the same period last year and a $2.7
million decrease in revenue-related franchise taxes.
Regulated transmission and storage gross profit increased $2.1
million to $49.0 million for the quarter ended December 31, 2010,
compared with $46.9 million for the same period last year. This
quarter-over-quarter increase is due primarily to a $3.1 million
increase in revenues resulting from filings under the Texas Gas
Reliability Infrastructure Program (GRIP) and a $1.6 million
increase in demand fees. These increases were partially offset by a
$1.5 million decrease from lower per-unit transportation margins
and a $1.0 million decrease due principally to a decline in
throughput to the Mid-Tex Division.
Nonregulated gross profit decreased $44.6 million to $25.2
million for the first quarter of fiscal 2011, compared with $69.8
million for the prior-year quarter. The decrease primarily reflects
a $43.4 million decrease in unrealized margins due to a significant
unrealized gain recognized in the prior-year quarter. The
prior-year quarter unrealized gain resulted from narrowing spreads
between the then current cash prices and forward natural gas prices
experienced on Atmos Energy Holding’s (AEH) net physical position
and the deferral of physical storage withdrawals to later in the
2010 fiscal year. Gas delivery margins were flat compared with the
prior-year quarter as an 8 percent increase in consolidated sales
volumes was offset by a decrease in gas delivery per-unit margins.
The $2.0 million decrease in realized asset optimization margins
from the prior-year quarter primarily reflects the impact of
continued low natural gas price volatility.
Consolidated operation and maintenance expense for the quarter
ended December 31, 2010, was $116.6 million, compared with $123.9
million for the prior-year quarter. Excluding the provision for
doubtful accounts, operation and maintenance expense for the
current quarter was $115.0 million, compared with $121.3 million
for the same period last year. The $6.3 million decrease resulted
primarily from a $4.2 million decrease in employee-related costs
and a $1.8 million reduction in legal and other administrative
costs.
The debt capitalization ratio at December 31, 2010, was 51.4
percent, compared with 51.3 percent at September 30, 2010 and 51.0
percent at December 31, 2009. At December 31, 2010, there was
$248.0 million of short-term debt outstanding, compared with $126.1
million at September 30, 2010 and $179.7 million at December 31,
2009, primarily due to seasonal borrowings to fund our working
capital needs.
For the quarter ended December 31, 2010, the company generated
operating cash flow of $45.8 million, a $49.4 million reduction
compared with the first quarter of fiscal 2010. The
quarter-over-quarter decrease primarily reflects differences in the
timing of customer collections and vendor payments.
Capital expenditures increased to $123.2 million for the fiscal
2011 first quarter, compared with $115.4 million in the prior-year
quarter. The $7.8 million increase primarily reflects spending
related to the Mid-Tex steel service line replacement program and
to the purchase of software for new customer service systems,
partially offset by the relocation of the company’s information
technology data center in the prior-year quarter.
Outlook
The leadership of Atmos Energy remains focused on enhancing
shareholder value by delivering consistent earnings growth. Atmos
Energy still expects fiscal 2011 earnings to be in the range of
$2.25 to $2.35 per diluted share, excluding unrealized gains and
losses. However, net income from regulated operations is now
expected to be in the range of $171 million to $178 million, while
net income from nonregulated operations is expected to be in the
range of $35 million to $37 million. Capital expenditures for
fiscal 2011 are expected to continue to range between $580 million
to $595 million.
However, the valuation on September 30, 2011, of the company’s
nonregulated physical storage inventory and associated financial
instruments (“mark-to-market”), as well as changes in events or
other circumstances that the company cannot currently anticipate or
predict, could result in earnings for fiscal 2011 that are
significantly above or below this outlook. Factors that could cause
such changes are described below in Forward-Looking Statements and
in other company reports filed with the Securities and Exchange
Commission.
Conference Call to be Webcast February 9,
2011
Atmos Energy will host a conference call with financial analysts
to discuss the financial results for the fiscal 2011 first quarter
on Wednesday, February 9, 2011, at 8 a.m. Eastern Time. The
telephone number is 877-485-3107. The conference call will be
webcast live on the Atmos Energy website at www.atmosenergy.com. A
playback of the call will be available on the website later that
day. Kim Cocklin, president and chief executive officer; and Fred
Meisenheimer, senior vice president, chief financial officer and
treasurer will participate in the conference call.
Highlights and Recent Developments
Fort Necessity Storage Project Update
In fiscal 2010, a subsidiary of AEH entered into an exclusive
option and acquisition agreement with a third party storage
developer, (that was extended until March 2011), to develop the
proposed Fort Necessity salt-dome natural gas storage project. In
January 2011, the third party developer notified Atmos Energy that
it did not plan to commence the activities required to allow it to
exercise the option by March 2011. Accordingly, the option was
terminated shortly thereafter. The company is currently evaluating
its strategic alternatives with respect to this project.
Kentucky Lawsuit Verdict
Atmos Energy Corporation and two subsidiaries of AEH have been
involved in a lawsuit filed in the Circuit Court of Edmonson
County, Kentucky related to the Park City Gathering Project. The
dispute which gave rise to the litigation involves the amount of
royalties due from a third party producer to landowners (who own
the mineral rights) for natural gas produced from the landowners’
properties. Atmos Energy companies entered into contracts with the
third party producer to gather, treat and ultimately sell natural
gas produced from the landowners properties, but had no contractual
relationship with the landowners or the investors/working interest
owners.
On December 17, 2010, the jury returned a verdict in favor of
the landowners and investor/working interest owners and awarded
compensatory damages of $3.8 million and punitive damages of $27.5
million payable by Atmos Energy and the AEH subsidiaries. A hearing
is scheduled on February 28, 2011 to hear a number of motions,
including a motion to dismiss the jury verdict and a motion for a
new trial. In the event the trial judge denies these motions, Atmos
Energy will appeal the decision.
$200 Million Committed Revolving Credit Facility
On December 8, 2010, Atmos Energy Marketing, LLC (AEM) and
the participating banks amended and restated AEM’s $450 million
364-day committed revolving credit facility, replacing it with a
$200 million three-year facility with an accordion feature that
could increase AEM’s borrowing capacity to $500 million.
Change in Business Segments Effective December 1,
2010
As a result of the appointment of a new CEO effective October 1,
2010, during the first quarter of fiscal 2011, the company revised
the information used by the chief operating decision maker to
manage the company. As a result of this change, effective December
1, 2010, Atmos Energy began reporting its nonregulated operations
in one operating segment. Certain prior-year presentations have
been reclassified to conform to the current-year presentation.
This news release should be read in conjunction with the
attached unaudited financial information.
Forward-Looking Statements
The matters discussed in this news release may contain
“forward-looking statements” within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. All statements other than statements of
historical fact included in this news release are forward-looking
statements made in good faith by the company and are intended to
qualify for the safe harbor from liability established by the
Private Securities Litigation Reform Act of 1995. When used in this
news release or in any of the company’s other documents or oral
presentations, the words “anticipate,” “believe,” “estimate,”
“expect,” “forecast,” “goal,” “intend,” “objective,” “plan,”
“projection,” “seek,” “strategy” or similar words are intended to
identify forward-looking statements. Such forward-looking
statements are subject to risks and uncertainties that could cause
actual results to differ materially from those discussed in this
news release, including the risks and uncertainties relating to
regulatory trends and decisions, the company’s ability to continue
to access the capital markets and the other factors discussed in
the company’s reports filed with the Securities and Exchange
Commission. These factors include the risks and uncertainties
discussed in the company’s Annual Report on Form 10-K for the
fiscal year ended September 30, 2010. Although the company believes
these forward-looking statements to be reasonable, there can be no
assurance that they will approximate actual experience or that the
expectations derived from them will be realized. The company
undertakes no obligation to update or revise forward-looking
statements, whether as a result of new information, future events
or otherwise.
About Atmos Energy
Atmos Energy Corporation, headquartered in Dallas, is the
country's largest natural-gas-only distributor, serving over three
million natural gas distribution customers in more than 1,600
communities in 12 states from the Blue Ridge Mountains in the East
to the Rocky Mountains in the West. Atmos Energy also provides
natural gas marketing and procurement services to industrial,
commercial and municipal customers primarily in the Midwest and
Southeast and manages company-owned natural gas pipeline and
storage assets, including one of the largest intrastate natural gas
pipeline systems in Texas. Atmos Energy is a Fortune 500 company.
For more information, visit www.atmosenergy.com.
Atmos Energy Corporation
Financial Highlights
(Unaudited)
Statements of
Income
Three Months EndedDecember 31 Percentage (000s except per share)
2010 2009 Change Gross
Profit: Natural gas distribution segment $ 299,772 $ 294,627 2 %
Regulated transmission and storage segment 49,007 46,860 5 %
Nonregulated segment 25,178 69,775 (64 )% Intersegment eliminations
(397 )
(413 ) 4 % Gross
profit 373,560 410,849 (9 )% Operation and maintenance
expense 116,594 123,862 (6 )% Depreciation and amortization 56,161
53,839 4 % Taxes, other than income
40,696
42,552 (4 )% Total operating
expenses 213,451 220,253 (3 )% Operating income 160,109
190,596 (16 )% Miscellaneous expense (737 ) (269 ) 174 %
Interest charges
38,917
38,708 1 % Income before income taxes
120,455 151,619 (21 )% Income tax expense
46,458 58,289 (20 )%
Net income
$ 73,997 $
93,330 (21 )% Basic net income per share
$ 0.81 $ 1.00 Diluted net income per share $ 0.81 $ 1.00
Cash dividends per share $ 0.340 $ 0.335 Weighted average
shares outstanding: Basic 90,082 92,152 Diluted 90,408 92,509
Three Months EndedDecember 31 Percentage
Summary Net Income
by Segment (000s)
2010 2009 Change Natural gas
distribution $ 57,318 $ 51,448 11 % Regulated transmission and
storage 10,102 8,454 19 % Nonregulated 6,275 6,633 (5 )% Unrealized
margins, net of tax
302
26,795 (99 )% Consolidated net income
$ 73,997 $
93,330 (21 )%
Atmos Energy Corporation
Financial Highlights, continued
(Unaudited)
Condensed Balance
Sheets
December 31, September 30, (000s) 2010 2010
Net property, plant and equipment $ 4,859,344 $ 4,793,075
Cash and cash equivalents 129,892 131,952 Accounts receivable, net
564,934 273,207 Gas stored underground 339,105 319,038 Other
current assets
229,324
150,995 Total current assets 1,263,255 875,192
Goodwill and intangible assets 739,991 740,148 Deferred
charges and other assets
359,033
355,376 $ 7,221,623
$ 6,763,791
Shareholders’ equity $ 2,274,853 $ 2,178,348 Long-term debt
1,807,319 1,809,551 Total
capitalization 4,082,172 3,987,899 Accounts payable and
accrued liabilities 510,085 266,208 Other current liabilities
349,914 413,640 Short-term debt 247,993 126,100 Current maturities
of long-term debt
352,434
360,131 Total current liabilities 1,460,426
1,166,079 Deferred income taxes 892,090 829,128 Deferred
credits and other liabilities
786,935
780,685 $ 7,221,623
$ 6,763,791
Atmos Energy Corporation
Financial Highlights, continued
(Unaudited)
Condensed Statements
of Cash Flows
Three Months EndedDecember 31 (000s) 2010
2009
Cash flows from operating
activities Net income $ 73,997 $ 93,330 Depreciation and
amortization 56,207 53,875 Deferred income taxes 43,423 12,832
Changes in assets and liabilities (132,515 ) (69,263 ) Other
4,712 4,382 Net cash
provided by operating activities 45,824 95,156
Cash flows
from investing activities Capital expenditures (123,162
) (115,439 ) Other, net
(370 )
(1,873 ) Net cash used in investing activities
(123,532 ) (117,312 )
Cash flows from financing
activities Net increase in short-term debt 112,628
111,335 Repayment of long-term debt (10,000 ) — Cash dividends paid
(31,002 ) (31,234 ) Repurchase of equity awards (3,231 ) — Issuance
of common stock
7,253
5,681 Net cash provided by financing activities
75,648 85,782
Net increase (decrease) in cash and cash equivalents (2,060
) 63,626 Cash and cash equivalents at beginning of period
131,952 111,203 Cash
and cash equivalents at end of period
$
129,892 $ 174,829
Three Months EndedDecember 31
Statistics
2010 2009
Consolidated natural gas distribution
throughput (MMcf as metered)
120,544
134,521
Consolidated regulated transmission and
storage transportation volumes (MMcf)
99,841
95,938
Consolidated nonregulated delivered gas
sales volumes (MMcf)
94,538
87,229
Natural gas distribution meters in service 3,206,286 3,208,531
Natural gas distribution average cost of gas $ 4.92 $ 5.12
Nonregulated net physical position (Bcf) 19.6 19.0
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